There are a lot of financial strategies out there and some of them can be confusing. But if you’re looking to grow your wealth for the future, these are some of the best financial strategies to use in 2023.
Diversify your investments
Diversification is the process of investing in a variety of assets, rather than putting all your money into one asset class. Doing so can help you reduce your risk and better manage your portfolio.
For example, if you invest 100% of your money in stocks, then you’re very vulnerable to any kind of market downturn. During a market crash your investments will take a big hit. (look at 2008, 2020, 2022)
On the other hand, if someone diversifies their investments by investing some money in bonds or real estate (or both), then they can still make some money when the stock market goes down while avoiding big losses if there’s another crash like 2008’s financial crisis.
Diversifying isn’t just important because it helps protect against market crashes; it also helps investors catch the upside in markets as well. If something is going down, there is a strong chance a different asset class is going up!
Develop an asset allocation strategy
Your asset allocation strategy should be aligned with your investment horizon and risk tolerance. This means that you’ll use different percentages of each asset class depending on how much time you have before you need to access your money. For example, if you’re planning on retiring in 2023 then it’s best to invest more conservatively (i.e., less risky). However, if you’re still in school until 2024 and don’t plan on touching this money until graduation or afterward, then it makes sense for you to take greater risks because of the longer timeframe between now and when you’ll need those funds.
Dollar cost averaging
Dollar cost averaging is a strategy that can help you invest over time and avoid making rash decisions about your investments. The idea behind dollar cost averaging is to invest smaller amounts of money into an investment for a period of time. For example, if you buy $100 worth of stock once a month, you will be “averaging” the price over those months. This means that if there’s a dip in the market during one month and then it goes up in another month, your average purchase price will still be lower than if all your purchases were made at peak prices.
Contribute to your 401(k)
If you’re eligible to contribute to a 401(k), do it. Contributions made to your company’s 401(k) are tax-deferred, meaning that they aren’t taxed until you withdraw them.
Your contribution limit depends on many factors: how much money you make and whether or not you’re over 50 years old are just two examples of factors that affect what percentage of your income can be contributed each year.
Putting money into a 401k directly from your paycheck, allows you to pay yourself first and save for your future. If your employer provides a matching contribution, then you can compound your account using their money AND your money.
Purchase insurance
If you’re looking to protect your financial future and prevent unexpected costs, consider purchasing insurance. Life, health, and disability insurance can help protect your family, cover medical expenses, or protect your income, in the event of illness or injury.
Long-term care insurance provides coverage for assisted living care as we age.
Property and casualty insurance covers damage to personal property from events like fires or floods; however, it may not cover damage from earthquakes or other natural disasters.
Auto insurance protects drivers against bodily injuries sustained by others when they get into accidents (or vice versa).
Business owners should also consider buying business protection plans that offer liability coverage for lawsuits brought by customers who are injured on your property or products sold by your company. Flood and earthquake policies are an additional way to ensure that you are protected from these natural disasters if they occur near where you live.
Have Wills drafted
- Why do I need a will?
- A will determines how and to who, your “stuff” transfers after your death.
- A will determines how and to who, your “stuff” transfers after your death.
- Who needs to have a will?
- Anyone and everyone who owns anything, should have a will drafted so their final wishes can be executed.
- If you have young children it’s especially important to have a Will drafted, to determine guardianship.
- Who shouldn’t have a will?
- If your single and have little assets, you don’t need a will and the courts will determine how to transfer your “stuff.”
- If your single and have little assets, you don’t need a will and the courts will determine how to transfer your “stuff.”
- How do I get my will drafted?
- An estate planning attorney drafts this type of document.
- An estate planning attorney drafts this type of document.
- What information should be included in my will?
- You should name:
- An executor- the person in charge of moving the assets after you die.
- A beneficiary – the person/people who will receive your assets after you die.
- You can name secondary executors and beneficiaries if you wish.
- You should name:
Open a high yield savings account
If you’re looking to save money and make your money work for you, then opening a high yield savings account is a good start. A high yield savings account is an FDIC-insured product that you can use to set aside some cash without having to worry about losing it in the event of an emergency or other unforeseen circumstances.
If you don’t have an emergency fund, now’s the time to start one! We recommend setting aside enough money in this account so that if something drastic were to happen—like getting hit by a bus—you’d still be able to cover all your expenses without having to resort immediately back into debt. By having this cushion available at all times, it will make it much easier for when those kinds of situations arise because they won’t feel like such emergencies anymore.
Many banks and credit unions offer these types of accounts with competitive interest rates—some even offering upwards over 3% per year! The best part about them is there’s no minimum deposit requirement so even if all you have is $100 saved up, then open up an account today!
If you’re looking to grow your wealth, these are the best strategies to use in 2023.
- Diversification
- Asset allocation
- Dollar cost averaging
- Contribute to your 401(k) or IRA
- Buy insurance on all your assets (example: health and life)
- Have wills drafted that are updated every few years
- Open a high yield savings account, like a money market fund or an FDIC-insured certificate of deposit (CD)
With these strategies in place, you’ll be able to build your wealth and make smart investment decisions that will help you reach your financial goals.
